Strategic Review Update 3 JULY 2018
Agenda Strategic Review Investors, Customers & Employees Andrew Ferrier | Chairman Ian McCrae | CEO Share Buyback Q&A Andrew Ferrier | Chairman Summary of Agreement Ian McCrae | CEO Mark Tisdel I CFO The Offer Board Recommendation 2
Andrew Ferrier Chairman 3
Strategic review highlights • Over 14 months a comprehensive review of options to evaluate the best form of partnerships and investments • Recognised that each of the three businesses – Rhapsody, Population Health, Hospitals – needed individual consideration • Orion Health Board and executive have worked with Hg to conclude an agreement • Hg is a specialist technology investor with expertise in helping build global businesses - Funds of c.£10 billion under management 4
Summary of the agreement • • The bottom of the estimated buy back price range Agreement is for Hg to acquire majority ownership in Orion Health’s Rhapsody business and to invest in represents a premium of 46% to the closing price Orion Health’s Population Health business per Orion Health share of $0.85 on 2 July 2018 and 55% to the volume weighted average trading price • Hg Transaction implies a $255 million enterprise over the last 20 trading days value of Orion Health • The Hg Transaction is subject to a number of • Following completion of the Hg Transaction, Orion conditions, including: Health will undertake a share buyback offer at an - Approval of the Hg Transaction and share estimated price range of $1.24-$1.29 per share buyback offer by Orion Health’s shareholders - Final offer price to shareholders dependent on - Approval of Overseas Investment Office Orion Health’s available cash following completion - Shareholders will have the option to accept the - Receipt of third party consents share buyback offer in respect of all or a certain portion of their Orion Health shares 5
The offer • • Hg will acquire Rhapsody for $205 million The balance of net proceeds from the Hg Transaction will be used to: - Orion Health will utilise circa $28 million transaction proceeds to acquire an ongoing 24.9% a. fund the share buyback offer; shareholding in the Rhapsody business b. pay transaction costs; and • Hg will also acquire a 24.9% stake in Population c. fund the Hospitals business and any future Health by investing circa $20 million capital requirements of Population Health - Orion Health will invest around $12 million of the Rhapsody transaction proceeds in Population Health - Population Health based on an agreed enterprise value of $50 million • Orion Health will continue to own 100% of its Hospitals business 6
Share buyback • Shareholders will have the option to elect 100%, 50%, 20% and 0% participation in the share buyback offer • The share buyback is intended to be a share cancellation with the intent that it should not be a dividend for tax purposes, and therefore not taxable to capital account shareholders • McCrae Limited has undertaken to elect to participate in the share buyback offer with respect to 20% of McCrae Limited’s shares, and will remain as Orion Health’s largest shareholder 7
Board of Directors recommendation The Hg Transaction enables the Group to benefit from Hg’s funding and technology expertise while allowing each of Orion Health’s three businesses to capitalise on their full potential. This represents an opportunity for shareholders to realise a premium, in cash, to the Group’s current valuation for all or a portion of their shareholdings or continue as a shareholder to benefit in any potential future value creation. • • The Board unanimously recommends the Hg Transaction and Certain shareholders and Directors of Orion Health have the share buyback offer to shareholders for approval, subject provided to Hg an irrevocable undertaking to vote their to their review of the independent report from KordaMentha shares in favour of the Hg Transaction and the share buyback offer, representing total of 15.5% of Orion - A shareholders’ meeting is expected to be called late Health shares September - Orion Health’s largest shareholder, McCrae Limited is • Preclosing conditions including: restricted by the Takeovers Code from providing an equivalent undertaking; however it has also given to Hg - Approval of Orion Health’s shareholder confirmation of its intention to vote its circa 50% of - Hg obtaining approval under the New Zealand Overseas Orion Health shares in favour of the Hg Transaction Investment Act and the share buyback offer. - Receipt of third party consents to transfer certain Rhapsody customer contracts 8
Ian McCrae Chief Executive Officer & Founder 9
What does this mean for: OUR INVESTORS OUR PEOPLE • • Shareholders will have the choice to sell or remain Better able to deliver our product roadmap and Orion Health’s vision • The bottom of the estimated buy back price range • represents a premium of 46% to the closing price per Spearheading the next chapter of Orion Health’s Orion Health share of $0.85 on 2 July 2018 and 55% delivery of technology and innovation for healthcare to the volume weighted average trading price over the organisations globally last 20 trading days • This investment and partnership will help global teams plan for the long term OUR CUSTOMERS • With Hg, we have ambitious plans for Rhapsody OUR COMPANY • Our Population Health and Hospitals customers will • This Hg investment will enable Orion Health to reach benefit from these companies having far greater its full potential resources 10
Q&A Mark Tisdel Chief Financial Officer 11
Appendix 12
Valuation of Orion Health implied by Hg Proposal The proposal values Orion Health at $1.24 – $1.29 per share – a 55% premium to the volume weighted average trading price (at time of writing) Transaction Structure (N Z$m ) Hg Offer Value (NZ$m) Hg’s proposal values Orion Health at an enterprise value of NZ$255m, Rhapsody 205 consisting of: • $205m for Rhapsody Population H ealth 50 • $50m for Population Health H ospitals - C ash 8 O ther Assets / Liabilities - Enterprise value of O rion H ealth 263 This implies a price per share of Transaction C osts of O rion (8) NZ$1.24 - $1.29 (subject to closing Assumes 200m share on issue Share buyback price (after fees) $1.28 including 2.3m of restricted shares adjustments) on a fully diluted basis The transaction raises $219m from O rion Health Value debt and Hg’s contribution 24.9% of Rhapsody 28 75.1% of Population H ealth 62 C ash left in O rion H ealth 12 Value received by shareholders rolling Total 102 over is the same as those exiting. Assumes 100% of minority Total value (per share) $1.28 shareholders plus 20% of McCrae Limited accept the share buy back
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